Shares surged 25% to $67.77, despite a protracted livestream Internet presentation at which Ackman again attacked Herbalife for its business practices and charged that the company is essentially a pyramid scheme with "phantom, fictitious customers."

Ackman, head of Pershing Square Capital Management, disclosed details of his latest investigation into more than 240 Herbalife clubs during a webcast at the AXA Equitable Center in New York. He said the company is targeting Latinos and other lower-income socioeconomic groups looking to become entrepreneurs.

Ackman's presentation - viewed by more than 10,000 online - is the latest salvo in his $1 billion bet he made against Herbalife in December 2012. But after Ackman told CNBC on Monday that Tuesday's presentation would deliver a "death blow" to Herbalife, investors reacted to the ongoing high drama as if he had pulled his punches.

Several well-known investors, including George Soros and Carl Icahn, who holds a 17% Herbalife stake, have bet against Ackman. And by mid-day Tuesday, Herbalife had recouped Monday's 11% loss, and more. Among medium-cap stocks, Herbalife was the biggest gainer on the New York Stock Exchange, with 28.9 million shares traded, nearly 20 times normal volume.

The first hour of Ackman's presentation focused on Herbalife's use of nutritional clubs to lure customers and acquire free labor.

"Herbalife has phantom or fictitious customers," Ackman said during the webcast, adding that many are uneducated trainees working without pay in the hopes of landing jobs as club distributors. "It's a tragedy. They don't realize they're being defrauded," he said.

To explain how it works, he turned to Christine Richard, a former Bloomberg News reporter who's now working for Ackman's group.

"What they're selling is smoke and mirrors," she said, adding that trainees expect they're investing in an education that will reap a good income. She said the trainees, before distributing the products to others, have to pay for classes and shakes and many end up spending at least $3,000.

"It's the beginning of a treadmill" that keeps people at the clubs, Richard said.

Ackman said the practice "creates this tendency to want to stay, because you're almost going to make it."

In a series of statements, Herbalife pounded Ackman.

"Once again, Bill Ackman has over-promised and under-delivered on his $1 billion bet against our company. After spending $50 million, two years and tens of thousands of man-hours, Bill Ackman further demonstrated today that the facts are on our side."

"We will continue to focus on our mission of bringing good nutrition and economic opportunities to communities across the globe. We recognize that he is running out of time to make good on his bad bet against Herbalife, with the equivalent of 25.7 million shares in put options that expire on January 17, 2015. Today is evidence that Bill Ackman will not succeed."

"According to a recent study commissioned by the company, 87.5% of nutrition club operators feel good about the money they earn and 92% want to continue with their club,'' Herbalife said. "We are confident that the facts are on our side and look forward to fighting back."

Herbalife was founded in 1980 and specializes in protein shakes, vitamins and dietary supplements intended to aid weight loss and improve health.

"Herbalife is a company about great products and great company," said CFO John DeSimone. "We are proud of the tireless efforts of our millions of members around the world and know that their passion is what makes Herbalife the incredible company it is today."